Page 14 - Budget Newsletter - March 2023

On the R&D front, the Chancellor announced three changes in the Autumn Statement, all of which
were legislated to take effect from 1 April 2023:

• The R&D Expenditure Credit (RDEC) rate will increase from 13% to 20%;
• The small and medium-sized enterprises (SME) additional deduction will decrease from
130% to 86%; and
• The SME credit rate will decrease from 14.5% to 10%.

The cuts for SMEs were seen as being driven by the tax cost of the current regime and were widely
criticised by those set to be affected. In response, the Chancellor has reinstated a 14.5% SME
credit rate for companies with qualifying R&D expenditure that represents at least 40% of their
total expenditure.

The Government has also been consulting on the design of a single scheme, and to understand
whether further support is necessary for R&D intensive SMEs, without significant change to the
overall cost envelope for supporting R&D.

Planning Point

Remember that if your company’s financial year straddles 31 March 2023, you could face a
composite rate of corporation tax for the current financial year. For example, if your company
has profits of over £250,000 and a year end of 30 June, for the financial year ending 30 June 2023
the applicable corporation tax rate will be:

19% x 9/12 + 25% x 3/12 = 20.5%

Pensions

There have been many important pension changes in recent years, with three major measures
announced in this year’s Budget:

• The LTA which sets a tax efficient maximum value of pension benefits, will effectively be
scrapped from 6 April 2023. LTA charges and the various transitional protections will thus
fall away. The Labour Party has already announced it will reverse this move if it wins the
next general election.

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